- New in-person Real Estate Rockstars interviews [1:43]
- Pocket-listing ban swings into effect [3:10]
- Transamerica Pyramid to sell for $700 million [6:44]
- Americans taking longer to sell homes [13:47]
- Home ownership rate climbs to highest since 2013 [17:49]
- Homes changing hands in one year or less in select markets [22:50]
- A new approach to instant offers [25:07]
- Big money and MLS disruption here to stay [27:22]
- How to break through your goals.
- Plus so much more.
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Aaron Amuchastegui: Hello. Again, real estate rockstars. This is Aaron Amuchastegui back with my friend Paul Morris today to talk more state of the market and real estate news. Paul, how’s it going, man?
Paul: Good, man. How are you doing?
Speaker 1: I’m doing well. I’m glad we were able to connect today to get to chat, but really, just to start off, there were some really cool podcasts that you recently did some interviews on– You had a film crew out there. That’d be great for our YouTube page, and some of those other things. Tell me, it looked like some pretty fun stuff. Tell the people that haven’t heard those. One of them just published a couple of days ago. One of them is coming this coming Friday. What was that like? Who are you interviewing?
Paul: First one was with Jeffrey Saad and Jeffrey Saad has an incredible career as a realtor, but he started out on the Food Network. He was a Food Network star, obviously very charismatic, great on screen. One of the things I love about him is he moved to a totally new place. He moved from San Francisco to LA, not knowing anybody. He built his business from zero to $1 million in net, not GCI, but $1 million net in six years. He talks about the whole ramp up from basically from zero to two total rockstar. Really great.
Speaker 1: It totally makes sense that cows on the Food Network on video, he was awesome. I mean, if you guys haven’t gone and seen it yet, or you haven’t gone and checked out the YouTube page yet, this would be one of the first ones to do it. That you’ll be like, wow. It looked like a ton of fun they had and the amounts of great info in there.
Paul: Yes. We didn’t need, I didn’t need acting lessons. I just tried to do what Jeffrey did and it was all good.
Speaker 1: Just mirror. Well, that is awesome. Like I said. I had so much fun listening to those and seeing them, and I can’t wait for more people to get to see him on the YouTube page, but I wanted to be able to meet with you so we can talk news like we have been our last few weeks. First I wanted to start with, one, we’ve talked about several times when me and Pat Hiban last month, we were talking about this. I think maybe you and I talked about it a little bit a couple of weeks ago, but there’s been a whole lot of stuff in the news about pocket listings and the pocket listing bans and the– Last month the realtor association said, Hey, they’re going to make it illegal anywhere.
This article Inman on February 4 says, “Bright MLS, no fines issued as pocket listing ban kicks in.” This is the mid-Atlantic group. Back before even all the realtors voted that they were going to do this. I think it was back in October, November, the article says, they said they were going to make it illegal to do pocket listings which really means if you say,” Hey, you can buy this house for a hundred thousand dollars, you have to put it on the MLS within 24 hours, or they’re going to fine you $5,000.
Everybody was super stressed out about that. It’s going to change the world. There’s so many wholesalers out there is going to totally change their business plan. The law came into effect now for them just a few days ago. They said that, “Since it started, nobody’s violated, nobody’s actually had to been fined $5,000.” What do you think about the pocket listing ban? What do you think it’s going to do to all these wholesale companies and things like that?
Paul: Well, first of all, when they said, “No fines issued.” I was like, wow, does that mean they’re not enforcing it, but actually it has.
Speaker 1: Yes, that’s a good question.
Paul: It had exactly the opposite effect and that is that people just stopped doing it. They did not want to be hit with that $5,000 fine. It just goes to show you what a little bit of government regulation can do really changing the landscape of a market. First and foremost, I think that the idea behind is quite good, because we want to make sure that people are getting a fair shake on their house. The idea of, “Hey, we’ll just quietly list it,” it gives some realtors the opportunity to double-end it, which takes the opportunity away from lots of other realtors, number one.
Number two, it really can negatively affect buyers and sellers. I think all in all, a pretty good policy. Now, in terms of the wholesalers, I see a lot of folks going direct to homeowners on that sort of thing. I don’t know that the pocket listing is really going to negatively affect them in the long run. I think you’ll see a pivot from them. That’s my view. What do you think on that?
Speaker 1: Yes. One of the easy workarounds I was thinking was you just can’t be a real estate agent. That’s the thing, like, I’m an investor, I’m not an agent. I love what agents do and what realtors do out there, but there’s some added kind of flexibility you get. I think that’s just the ultimate loophole. Somebody really wants to be a wholesaler and they can’t be a real licensed agent using the MLS.
Paul: Yes. Okay. You’re thinking, right. You’re really thinking practicality of it. I think that is a good point. We’ll see how that plays out. That’d be awfully rough if we saw that. I don’t see that happy on a wide swath, but interesting point for sure. Really.
Speaker 1: I, and my personal, I think it’s a great law. I think that overall, the pocket listings, it’s not the best way to represent your client. Of course, there’s exceptions to it. There’s some people that are so good at doing it that maybe it’s going to make the price go up even more, but it’s not supply and demand. When everybody sees it out there, more people are going to make an offer on it.
Paul: That’s right.
Speaker 1: The fines are out there. Now they’re doing it, so far it’s worked. It’s not that they’re not enforcing it. It’s nobody’s doing it. We will see more over the next few months as more agents and places start to do it. Let’s jump onto something else. There was some other news. The San Francisco, this was on Bloomberg news, it says the TransAmerica Tower sold to a New York City developer. Did you take a look at that at all? Did you see much about that?
Paul: Yes. These sorts of things always amaze me because I know you’re an investor, I’m an investor. I’m always looking at the value add play. Like, “Oh, hey, what’s that? Let’s get some that’s kind of rough around the edges. Let’s maximize it. Somebody stopped being maximized. Then I see people make these plays on really marquee properties and they are paying an absolute premium for a marquee property. This is a property that they tried to sell. I think it was a 49% stake in it before, and they failed, and now, lo and behold, they get a pretty big number for a tower that a lot of people think is just butt ugly for starters, kind of an eyesore at the time that they built it.
They really had a backlash against buildings that tall it’s like a space needle kind of thing. Then here you see a guy pull down a really big price. Interesting that he and his partners have also paid big money for example, for the Coca Cola building in Manhattan. He’s accumulating these like marquee properties. I do see it work for other people. Not, not my taste or style of investing, but it works.
Aaron: Yes. The price about $700 million. If you’ve seen San Francisco or seeing the skyline, its the really tall, skinny pyramid, like the big triangle building. I think a few years ago when I started looking at apartment complexes and there’s different levels of assets that people bought and people would buy assets for the cap rate and they buy it for the return and they buy these BNC class for a high cap rate. Then they’d buy these A and B class for a lower cap rate, but buildings that were nice and safe.
Then they have these other investments that people would buy because they wanted their name on that real estate. Then maybe the cap rate was super low, like two or three, but this was an asset that they could go show other people and go, “Hey, we own this.” Maybe that’s the play here. Maybe it’s more of a, something that you could be proud, less of a real estate investment, and more of a big deal.
Paul: Yes. I see that around, being right here in Los Angeles, I watched them do it on 3rd Street Promenade where we just couldn’t figure out how to make this particular property go at $27 million for a small piece on the 3rd Street Promenade, and lo and behold, they get an Apple store lease there. They sold it at what was almost like it’s almost a zero cap. You’re just like, “Wow, how’s that possible?” People want that marquee. They want that marquee piece of property.
Aaron: Especially in those big places, places like California and New York, they might not get the cap rates, but those are places that are really known for that real estate appreciation. I mean, a doctor wants, it owned so much real estate in San Francisco and he said, every month, he would lose money on it and he’d pay a little bit extra money toward it. Then every few years he’d make a million dollars to sell him the thing.
Paul: Absolutely. You see that appreciation, it just doesn’t stop in some of these marquee areas, top-notch areas.
Aaron: Well, it really is interesting. Next time I see the San Francisco skyline I’m going to think about that.
Aaron: Back to an Inman article. We’ve got Marcus on economy article says, “Americans are staying in their homes longer.” That was this week. It says, “Homeowners, especially those in Connecticut are staying in their homes longer and reaping the benefits of a more robust price appreciation.” It said, “The length of stay in a home hit a new high in 2019 homeowners who sold in the fourth quarter 2019 own their homes for an average of eight years.” What do you think’s causing that? What’s behind it?
Paul: I look, and there’s just been periods of time where the millennials are just moving more and more and people– You go all the way back into history, and people were staying put a lot more. We’ve had this trend for a very very long time where, back in the day, people would stay put in their hometown. Now, people are moving, there’s so much more mobility from city to city, people following jobs to different cities, people just deciding that they’re going to move from, inner-city to the suburbs, or suburbs to inner-city is so much more movement, and then to watch it. The pendulum swing back the other direction, very interesting. It’s interesting. What are your thoughts on the reason behind that?
Aaron: Yes, or why are they selling now? Prices have been going up so far. People have been holding their houses for eight years. Why are they finally deciding to sell? I have to imagine they’re seeing this huge price appreciation. They’re starting to feel maybe, essentially, they bought their house eight years ago, their house has been appreciating since 2012. It’s been going up and going up and every year it’s that extra thing and maybe now they’re either feeling “Hey, it’s a good time to cash out,” or maybe they’re feeling like the markets going to slow. Maybe it’s a little bit of a bet. I don’t know, it seems like the price appreciation has to be a factor in what pushes them out to do that.
Something Pat and I talked about, maybe a couple of months ago on a similar topic was at that time, they were saying, “Property taxes was what was keeping people from buying it, from selling their houses,” because in California you could be locked in. If you bought that house for 300 grand, it’s worth a million bucks now. Your property taxes are based on that $300,000 purchase price. They can’t just increase it. Places like Texas, they increase it every year based on what they think it’s worth.
Maybe in places like California, I could see people waiting and waiting because if they’re just going to sell their house for a million dollars and buy a new house for a million dollars, their property tax goes way up. This isn’t saying it was– California was some of the top 10 US markets. Connecticut was all the top ones. It said Norwich, New London, New Haven, Connecticut, Torrington, Connecticut, Springfield.
Then down at the ones that still made the list in the top 10 were Santa Cruz California, Santa Rosa California, Thousand Oaks, California, it could be a little bit about price appreciation other stuff, but maybe people are just being more content in their house. It’s baffling. I think it has a lot to do with the way the market is. I think maybe in 2012 it felt everything was fixed. People would learn their lessons, they bought these new houses, and then they just saw appreciation for them so why move?
Paul: The other thing too, which I found a little bit confusing about that news is they’re staying in their home, but if they move, it doesn’t mean they’re cashing out. Are they then moving up? Are they getting something bigger? That’s cashing out. They’ll be moving down or going into apartment, it didn’t really say where they were landing. I had that question. The other interesting thing too is I know, again, we talked a little bit about another news story, and that was just that homeownership has reached this massive high. I know you’ve got the stats on that. I think it was 65% or 65.1%. Now it’s really a high in, what, about six years? Is that right?
Aaron: Yes that’s right. That’s a Bloomberg article, “Homeownership rate in the US climbs the highest since 2013. It was 65%, the biggest since the end of 2013 seconds rating increase climbing from 64% in the previous three months.” That is wild, homeownership goes up, because that’s not what you actually hear about in the media, right? That’s usually, I was surprised by that because it seems like there’s so much bad news out there with real estate or these companies owning houses and people are having to rent, but the homeownership rate is the highest since 2013.
Paul: Totally amazing. I think, there’s some very obvious facts on that. One would think if you put your hand over the number and said, “Hey, Paul, what do you think it is?” I would have guessed less, I really would have because as we get into a market, the price goes up and up and up, the affordability index gets out of whack, which is really one of the number one predictors in whether the markets overheated or not and you’re really out of whack with the price affordability index. I take my hand off that I’m like, whoa, wait a minute, the highest amount homeownership since 2013, I’m like, that’s interesting. The only thing I can attribute that to is, it’s got to be the low-interest rates.
Paul: It is in the lower price markets, it’s the first time home buyers, it’s people that haven’t owned homes before, or traditionally, and now getting into more homeownership it’s because credit is getting a little bit easier and money continues to be at an all-time low. People look at that, they don’t look at the price as much as they look at how much it’s going to cost per month, which makes total sense.
Aaron: Yes, we’ve been talking about mortgage rates a lot over the past few weeks because there has been a lot of news in that. You talked a lot about supply and demand, but as rates go down, affordability goes up. Somebody that could not afford a starter home last week can afford one this week so that has to be something that’s impacting that, but again, counterintuitive because I thought this whole year, there’s so many new people out there that are choosing to rent instead of buy and there was so much in the news about affordability and things like that.
I think, overall, that’s good news, I’m a fan of homeownership, I’m a fan of investors too. I’m a fan of people owning houses, and people buying houses. I think that was a pretty cool stat, I was surprised by it.
Paul: Yes, very, cool and I totally agree with you. It’s the first thing that I talk to people about when they’re talking about investing. I talk to them about, “Do you own your own home?” If not, that’s the place to start first for sure.
Aaron: Yes, that’s the first place to. I waited way too long, I had flipped so many houses before I actually lived in a house that I owned but I’ve gained way more in value, long-term value from having those ones that I live into.
Aaron: One of the funny things of the article, that was talking about, how eight years is there, it also puts some stats in here of there’s a few cities that people lived in, for much, much less. It was Oklahoma City, Oklahoma, everybody’ had sold in the fourth quarter last year, average age of that they own the home was a year, while Colorado Springs, Colorado a lot of people have sold in December this year, on average, they bought in December last year.
There’s a handful of places where all of the sales in the fourth quarter, were down to just months, which was just crazy San Antonio, one and a half, years of ownership, grand rapids, a year of ownership. That’s on the opposite end of the spectrum, and there’s less of those places. That’s really interesting to me, too, if you were going to be an investor or an agent, what would you look at differently if you were saying, hey, there’s only people are selling after owning their house for only a year, what’s that about?
Paul: One thing is a little bigger picture thing and that is, real estate is local, it really is. One thing when you look at all of these big stats about money and cost of money, and homeownership length of homeownership is a perfect example. You really have to know your area, as a realtor, you’ve got to know your area, because I’ve heard a bunch of people say, it’s like a national weather forecast. You couldn’t say like, Oh, well, the weather today in the nation is X, it wouldn’t make any sense. It’s really a local market, you’ve got to get in there.
In other words, Colorado Springs as opposed to New Haven, Connecticut, totally different worlds in terms of how long people are holding houses, so you got to know your market. A national statistic is just going to be meaningless when you look at those two things.
Aaron: Know your market and look at it because we’re going to–We do some of that big picture news but it’s also fun to see those stats that are the total opposite, just to remind us that, hey, this could be happening in 90% of the country but don’t go invest over here just because it’s doing that way over there. Don’t do it that way, great advice to all agents out there to stay local.
Just a couple more things we were going to talk about today that were pretty interesting. We’ve been talking about ibuyers and instant offers and so much over the past few months, it seems it is all over the news and in Inman, did you see that article, Berkshire Hathaway Home Services now with their own instant offer option?
Paul: Yeah, instant offer, one that was very cool and interesting was the offer lock. You remember that the offer lock is where–Obviously, we know what an instant offer is. They’re going to say, hey, here’s your offer, we’ll close in 14 days, done deal, period, but the offer lock is they give a price, and you have a certain amount of time. I think it was 100, do you have that stat?
Aaron: 150 days, this is the first time I’ve seen this.
Paul: Give me 150 days like, hey, we’ll give you this price, go ahead and run around shopping around and that price is good for 150 days. Really, interesting, for sure.
Aaron: Yes, they would, I think the way that it reads it says there’s a quick buy lock option, which after they give them the offer, it’ll give sellers time to try to sell the home for a better price if they want for 150 days, but if they can’t, let’s them fall back on the initial offer, that is crazy. Somebody says, hey, I’ll give you $150,000 for your house and you say, I’m going to try to list it for a little while first.
Then four months later, you can–Because that happens every time we try to sell house as an agent, there’s always a time you’re like, oh, we should have accepted that first offer, now it’s too late and we’re stale. That’s like going out, you could actually four months later come back and say hey, we changed our mind, we do want to take the offer that will totally. I want to learn more about the fine details of that because that totally sets their offer deal apart from any of the ones I’ve seen so far.
Paul: Correct, and it’s going to give an advantage to that firm, there’s no question. I always look at it and go, how are they going to– How does this make financially, and sometimes it’s just to get the business advantage.
Aaron: There’s so much real estate software, real estate technology, different things out there. Now when you go on Zillow, there is way more about, let us try to buy your house, than there is real estate info. I don’t know. I don’t know how often you check that site out, but it has been changing so much over the past few months.
The last article I wanted to talk about maybe ties a lot of that stuff together, end of last month on Inman says, “Big money and MLS disruption are here to stay.” I said, Friday, the multiple listing service landscape is likely to see continued technology innovation as well as consolidation in the future. What do you think about that? Did you see that article?
Paul: Yes. The interesting thing there is, it’s just, over time we see consolidation. The little MLSs cannot compete because they don’t have the money, and the staff, and the technology to compete against something, even a big MLS let alone Zillow. In one of the recent interviews that I did I talked to–
It was Jeffrey Saad that was talking about that and just said, “Hey, you know what? It doesn’t matter. It doesn’t matter. Our RMLS is great. We’ve got a giant MLS. They do decent job, but we go to Zillow and check out the latest news on pricing and what’s for sale and they’re updating so much faster.” Yes, I do think the push is going to be for a really better service. Service has got to be better for the MLS
Aaron: Really, in my mind, I think it only helps the consumer. It only helps everybody. I live in Austin and there’s a few of these areas near Austin, where there could be three different MLSs for one city. People go, “Oh, no, I have my–” If they list your house, they’re like, oh, it’s only on one of the MLSs instead. They go, well, my membership is over here, I don’t pay for all three memberships.
It might not be on this guy’s site or this guy’s site, but it usually it is on Zillow or Redfin or one of those other ones. By trying to keep them separate, they’re actually hurting the consumer or hurting their own MLS.
With all the technology and innovation out there to me, it’s like, I feel like it’ll be better for everybody if more than consolidate, team up, share that data because the sites that are doing that, the sites that are really boosting that technology, you have the Zillows of the world, they are taking away from those local MLSs because they were the ones that said, let’s consolidate, let’s share all the information.
They’re keeping it secret. It’s always baffling to me when people are like, no, they see a for-sale sign in the yard, and they’ll call me and go, well, it’s not in the MLS that we’re seeing. It’s like, well, which MLS are you looking at? That’s crazy. You shouldn’t have to do that.
Paul: You use a perfect example for Austin, which is, it’s a nice sized city. However, three MLSs is crazy. When I think about in those instances is you’ve got like, these territorial dinosaurs just hanging on to their turf and they don’t care. They are able to hang onto their little piece of the pie and they’ll ride it down into the ground. I’m going to tell you, that’s where it’s going, unless they really innovate and open their doors and consolidate.
Aaron: Some of the differences I talked about is, it’s challenging to be in MLS because they have to cater to both the 10-person shop, but also massive companies like Keller Williams. In other parts of business we’re like, who’s our avatar, who’s our ideal client, who’s our ideal customer, who am I really meant to serve? You can’t have anything more dramatic than that of the one-person brokerage compared to a whole brokerage of hundreds of agents. How many agents are in your office?
Paul: Oh, well, my office has combined with 3000 agents, but that’s over 16 offices, but yes, really huge. Our Beverly Hills office has more than 300.
Aaron: That is fricking incredible. That’s one of the reasons I love doing the news with you because you know so much about what’s going on in real estate, just from that. That alone is the challenge that different MLSs have when it’s like the type of customer and client they want to cater for because a big office like yours is capable of building their own front face website that ties into the multiple MLS that they have to, and so the just makes innovation–
I’m excited to see what continues to play out. There’s a lot of people that are non-MLS companies that are now launching software that agents are choosing to use instead, or launch insight MLSs. I think this year, we’re going to see a lot more of that.
Paul: That’s where you really have something that people refer to as a category king. You’ve got to really own that space and being second, third, fourth place in an area like that. You want to be the go-to, you want to have all the information, the folks that are in their little corner hoarding the information, they’re just going to die out, no question.
Aaron: Yes, I totally agree, man. Well, Paul, that was the state of the market. That was the news I wanted to talk to you about this week. I’m sure we’ll be back next week. For real estate rockstars out there, make sure to go check out our YouTube page.
Come find us, our podcast, hibandigital.com you’ll see links over to other stuff. Check us out at @rerockstars on Instagram, Real Estate Rockstars on YouTube. You can find Paul on Instagram. Paul, what’s your Instagram handle?
Paul: It’s Paul Mark. M-A-R-K Morris, M-O-R-R-I-S, so Paul Mark Morris.
Aaron: Come find me over there too. It’s my whole last name. You just start typing A-A-R-O-N, Aaron Amuchastegui. When you start that last name, it’ll auto-fill, you’ll find it. You’ll see my real estate tips in there. You’ll see links to the best podcasts that we do, and a lot of the other things out there, but be sure to continue to check us out and listen to Paul’s live interviews that he did last week in this publishing this coming Friday. Super superstar agents on there, a lot of fun and you get to see the stuff we’re doing.
Paul: We’ve got Tammy Pardee and she’s such a rock star. She does 600 million in real estate a year. One of the top teams in the whole United States, definitely top 10 in California. To hear her tell her philosophy, how she does things, it’s fascinating.
Aaron: It was another one of those live interviews with the camera crews there, just to try to create maybe even higher value for the YouTube page and the interview so check it out. Paul, awesome, chatting with you, man. I’ll catch you again next week.
Paul: Thanks a lot.